The central government on Monday came out with a raft of proposals to encourage electronic transactions, including income tax benefits for payments made through debit or credit cards, a move aimed at cracking down on black money.

Transaction charges on card payments at petrol pumps, gas agencies and railway tickets could be done away with. The government may also make it mandatory for all transactions above Rs1 lakh to only be conducted electronically.

These measures, listed in the “draft proposals for facilitating electronic transactions” that the government put up for public comments, is part of a broader strategy to discourage the use of cash and clamp down on India’s bustling parallel economy that operates outside the legitimate financial system.

Comments can be sent in till June 29.

"Tax benefits in terms of income tax rebates to be considered to consumers for paying a certain proportion of their expenditure through electronic means,” said the draft.

The e-transactions will include those made through debit/credit cards, mobile wallets, apps, net banking, electronic clearing service, National Electronic Fund Transfer and immediate payment service (IMPS).

The draft did not specify the tax sops the government could offer. The government is also looking at encouraging shopkeepers and traders to accept electronic payments rather than cash.

“Appropriate tax rebate can be extended to a merchant if at least say 50% value of the transaction is through electronic means. Alternatively, 1-2% reduction in value added tax could be considered on all electronic transactions by merchants,” the draft said.

Utility service providers such as electricity companies and telecom operators could offer a discount if subscribers paid their bills electronically, similar to state-owned BSNL that provides an incentive of 1% of the billed amount on electronic payments.

The government is also considering a levy of a nominal cash-handling charge on transactions greater than a specified level, implying that cash payment beyond a certain threshold may attract a transaction fee.

Also, currently, banks have to report the aggregate of all the payments made by a credit cardholder as one transaction, if such an amount is Rs 2 lakh in a year. The ceiling could be raised to Rs 5 lakh or more.

The government also proposed appropriate changes in the regulatory structure, if required, to promote mobile-based payment systems.